Credit Unions and Coffee: Three Lessons from Starbucks

In Howard Schultz book, Onward: How Starbucks Fought for Its Life without Losing Its Soul, Starbucks Founder and CEO shares the story of how the coffee company lost their way. Walking into one of his Starbucks locations one day, he realized something was missing. He couldn’t put his finger on it at first…but he knew that the company he loved was missing the magic it was founded with.

Shortly thereafter, he wrote a memo to his senior management team. He titled it: “The Commoditization of the Starbucks Experience”.

In the memo, he shared what he realized was missing. He pointed to a list of detrimental decisions that were made in the name of service, efficiency, profitability and growth. Decisions, all of which looked great in metric form, but nearly cost Starbucks their soul.

1. He realized that in pursuit of profit and growth Starbucks had commoditized its brand.

“Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”

2. He also realized that in the name of speed and service, Starbucks gave up the authentic, essential smell and grinding ritual of fresh coffee.

“When we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play…This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the effect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage.”

3. And as he shares in the book, the last straw for him was… the smell of burnt cheese. Yes, burnt cheese. A small detail most would never notice.

“The most acute example…the most symbolic representation of how Starbucks was deviating from its heritage and losing its magic, was the breakfast sandwich…People who have known me for years will tell you that few things had ever piqued my ire as much as that smell…I could not stand it”, he said.“The more popular they became [the sandwiches], the more our baristas had to heat them in our warming ovens. And when they did, the sandwiches’ cheese would inevitably drip and then sizzle in the ovens, releasing a pungent smell. Whatever rich, hearty coffee aroma remained in the store was overwhelmed by singed Monterey Jack, mozzarella, and most offensively, cheddar. The smell further chipped away at our narrative. Where was the magic in burnt cheese?”

When looking at the numbers, the sandwiches seemed like a great idea. They generated a significant amount of revenue for the company. They cut into the need for patrons to visit competitors for food on their way to work and they were popular with a large portion of their frequent visitors.

And yet, one slight detail was overlooked. The crucial smell of coffee – that intangible, essential café welcome was immediately done away with when the sandwiches melted and burned their cheese. It wasn’t just a smell…it was that the narrative told through the coffee aroma disappeared. Without a narrative…who was willing to listen? It told consumers, “Yes, we have the best coffee in the world…with the best aroma and taste – but don’t fuss over that, have one of our sandwiches…”

Schultz learned a very valuable lesson: the pursuit of profit must not overtake the pursuit of purpose. And when you pursue them in the wrong order…you can lose both. This isn’t just a lesson for Starbucks, but a lesson for us, too.

And just as Starbucks did, we must ask ourselves these same questions. What have we commoditized in our credit unions? What have we given up in the name of efficiency, profitability and scale? What is our burnt cheese? And, what has been the cost to our credit union narratives?

Bottom line: it’s the little things that count. The little things, literally, can make or break your brand. In Starbucks case…this was as little as the smell of burnt cheese overpowering the beautiful, inviting smell of coffee. It’s not just about ROI, profitability and margins. It’s not just about efficiency, scalability and growth. It’s about your story—your narrative.

Starbucks almost didn’t realize this before it was too late…let’s not make the same mistake.

Josh Allison is the founder and Chief Ideator for Think Café, a CU consulting company committed to authenticity and relevance. He is a passionate public speaker and has been invited to present on a number of topics related to youth outreach, relationship management and cu philosophy. His youth and business development programs have garnered national awards and recognitions, and he has been cited in the CU Times and multiple cu blogs for his innovation and ideas. www.joshaallison.blogspot.com/